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Oil rises to 26-month high on supply fears

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USD 

The greenback took a breather from its run with the bulls as new updates from North Korea hit the news. North Korean Foreign Minister Ri Yong Ho said on Monday, the North’s right to countermeasures included shooting down U.S. bombers “even when they are not inside the airspace border of our country”. “The whole world should clearly remember it was the U.S. who first declared war on our country,” he continued to tell reporters in New York on Monday, where he had been attending the annual United Nations General Assembly. The speeches from Evans and Kashkari haven't been hawkish at all, however Fed Chair Yellen’s speech later this evening may give the currency a bit of nudge.

EUR 

The common currency slipped to a one month low on Tuesday, with the markets concerned that months of coalition talks in Germany effect the economy and may make tighter euro zone integration challenging. German Chancellor Angela Merkel, who won a 4th term in elections on Sunday, now faces a tough juggling act to form a government with other parties.  On top of this, the French President Emmanuel Macron wants a fundamental overhaul of the European Union’s single currency zone. His ideas at his speech later today may include creating a euro zone budget and a euro zone finance minister. With all these events, the currency slipped as low as 1.1811 versus the dollar in morning trade in London, its weakest since Aug. 25.

On the economic data front, the German Ifo business climate index fell from 115.9 to 115.2 instead of rising to the estimated 116.00 figure while the import prices this morning came in higher at 0% against a predicted -0.4%.

GBP 

The British pound lacked clear direction at the start of the week as traders are trying to assess how the meeting between the UK PM May and President of the European Tusk may pan out. The Prime Minister’s speech in Florence didn't inspire a rally with the bulls with traders now weary whether a transition deal may be on the cards. No major reports due from the United Kingdom today with Brexit related news possibly being the main driver for the currency.

CHF 

The Swiss currency came alive during the latter half trading yesterday as risk aversion came into play, with the political uncertainty in Germany topped with the re-emergence of geopolitical tensions between North Korea and the US. As no reports were out of the Swiss economy yesterday and none are due today, currency-specific action and market sentiment stays in play. 

JPY 

The Japanese currency got a boost as market uncertainly came into play and the currency also reacted fairly positively to the news of a snap election. The Japanese Prime Minister Shinzo Abe is seeking fresh mandate to address the concerns regarding North Korea. While this could mean a bit of ambiguity in the near term, it could also lead to confirmation of the government's stance. No major reports due from Japan today.

Gold

Gold steadied on Tuesday after hitting its highest in about a week, supported by demand for safe-haven investments amid lingering tensions over the Korean peninsula.  Spot gold was nearly unchanged at $1,310.01 per ounce at 0636 GMT, after earlier marking its highest since Sept. 20 at $1,313.54.

Oil

Brent oil prices hovered near 26-month highs, supported by Turkey’s threat to cut crude exports from Iraq’s Kurdistan region. Turkish President Tayyip Erdogan, warned that Turkey could cut off the pipeline that carries oil from northern Iraq to the outside world, intensifying pressure on the Kurdish autonomous region over its independence referendum. The loss of this supply, combined with the 1.8 million bpd of supply cuts by the Organization of the Petroleum Exporting Countries and non-OPEC producers, has raised concerns of tighter supply. Brent crude futures slipped 17 cents to $58.85 a barrel by 0820 GMT, having earlier hit $59.49, the highest since July 2015. U.S. crude WTI futures eased 10 cents to $52.12 a barrel, after hitting a five-month high of $52.43 a barrel.

Economic Calendar (all times in GMT)

  • EUR Emmanuel Macron Speech (time n/a)
  • USD Fed’s Yellen Speech (16:45)

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